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Strong growth of the Swedish economy means that the central government budget is expected to show a surplus of SEK 28 billion this year and SEK 47 billion next year, according to the Debt Office’s new forecast. As a result, the Debt Office is reducing its borrowing in instruments including government bonds.

“The Swedish economy is still strong and employment is rising rapidly. This is an important reason why tax income is increasing and the budget balance is stronger in 2017,” says Hans Lindblad, Director General of the Swedish National Debt Office.

The underlying development of the economy remains strong in the forecast period and the budget surplus increases gradually from year to year. However, compared with the previous forecast the budget balance decreases sharply in 2018 since the Debt Office no longer assumes that lending to the Riksbank will be run down. The Budget Bill contains a number of reforms that would weaken the budget balance. But this is compensated for by rising tax income on account of the strong economic growth.

Sweden’s continued strong economic growth is partly due to economic policy being expansive, which have contributed to strong domestic demand with for instance investments growing rapidly, especially this year. Over the next few years, growth is expected to decline gradually as resources utilisation increases. GDP growth is estimated to be 2.7 per cent this year and 2.5 per cent next year, falling to 1.7 per cent in 2019. As the economy grows slower, unemployment is expected to increase somewhat.

Changes from previous forecast

This year the central government budget balance has been revised upwards by almost SEK 46 billion, mainly on account of higher tax income as a result of continued strong growth. The underlying budget balance will also strengthen in 2018. But since the Riksbank not will repay the loans taken to strengthen the foreign currency reserve, the forecast for the budget balance have been revised downwards by SEK 77 billion. Excluding the on-lending to the Riksbank, the budget balance in 2018 strengthens by SEK 24 billion compared to the June forecast.

Net borrowing requirement and central governmentdebt (SEK bn)

Previous forecast in brackets

2017

2018

2019

Net borrowing requirement (budget balance with opposite sign)

–28 (17)

– 47 (–124)

-55

Central government debt

1301 (1354)

1249 (1217)

1192

Central government debt as a share of GDP

28 (30)

26 (26)

24

Lower issue volumes of government bonds, inflation-linked bonds and T-bills

Strong central government finances in the coming years lead to reduced borrowing in government bonds and inflation-linked bonds. The issue volume of government bonds is reduced to SEK 2 billion per auction and the volume of inflation-linked bonds to SEK 500 billion per auction. The high use of the Debt Office's standing repo facility leads to substantial surpluses in liquidity management. To deal with this the issue volume of T-bills is also reduced. As of January 2018 the issue volume of T-bills will be SEK 5 billion per auction and the number of auctions will also be halved.